PayZen introduces “Care now, Pay later” to help consumers pay medical debt

Step aside, BNPL. There’s a new acronym attached to an emerging fintech sector, and San Francisco-based PayZen touts itself as a pioneer in this field.

PayZen specializes in what it dubs CNPL — “care now, pay later.” The startup aims to help consumers pay off medical debt without interest and to help healthcare providers move debt off their books. Analytics and data provider Definitive Healthcare estimates uncompensated care represents 8% of a hospital’s expenses.

To help accomplish this mission, PayZen just picked up $15 million in Series A funding. SignalFire led the round, with participation from new investors Link Ventures and 7Wire Ventures, as well as existing investors Viola Ventures and Picus Capital. This round brings PayZen’s funding total to $20 million.

The new round of funding will fuel growth of PayZen’s workforce from the current 35 people to more than 100 by the end of 2022, PayZen co-founder and CEO Itzik Cohen told FinLedger.

PayZen says its first-of-its-kind, AI-powered technology lets hospitals, healthcare systems and large physician groups more accurately determine a patient’s ability to pay medical bills. All patients qualify for the CNPL offering while avoiding interest or fees. The company expects growth of more than 10,000% in its dollar volume of processed payments from 2021 to 2022.

Executives at PayZen say their technology fills a gap in healthcare. Today, most financing solutions in the sector are geared toward elective procedures, such as plastic surgery or LASIK. PayZen’s platform encompasses all sorts of medical bills, not just those for elective procedures.

Earlier this year, the U.S. Census Bureau reported 19% of U.S. households carried medical debt in 2017. The median amount of this debt was $2,000. reports a much larger share of Americans hold medical debt today — 50%. Most of the debtholders surveyed by owed $1,000 to $5,000.

Regardless of how many Americans are saddled with medical debt, the scale of the problem is extraordinary. A study published earlier this year by the medical journal JAMA pegged the amount of unpaid medical debt held by collection agencies at $140 billion. Three years ago, a study published in the journal Health Affairs put the same total at more than $81 billion in 2016. RIP Medical Debt, a nonprofit, believes the tab could be far worse — potentially approaching $1 trillion.

“At PayZen, our mission is to address healthcare affordability for everyone, no matter the stage of care,” Cohen said in a news release. “With this fresh round of capital, we’re excited to improve the quality of more people’s lives, while serving as a trusted technology partner to medical providers across the country.” 

In conjunction with the funding announcement, PayZen said it has hired Richard Lopez del Rincon as its first chief revenue officer. He most recently was senior vice president of R1 RCM, a Chicago-based provider of revenue cycle management services for healthcare providers in the U.S.

Cohen was one of the co-founders of Webex, a videoconferencing company now owned by Cisco Systems, and was chief business officer at lending marketplace Prosper. Most recently, he founded and led Beyond Finance, a debt resolution fintech.

Cohen co-founded PayZen in 2019. The startup came out of stealth mode earlier this year with its announcement of $5 million in seed funding.

This year, Pennsylvania-based Geisinger became the first major healthcare system in the U.S. to adopt the PayZen platform. Now, Geisinger patients are invited to pay balances for out-of-pocket expenses of at least $250 in one lump sum or over a period of time. All of the payment plans come without interest or fees.

During Geisinger’s initial rollout of PayZen, 82% of patients enrolled after receiving their customized monthly payment plan, with an average monthly payment of $52. Geisinger and PayZen are enrolling hundreds of patients in the program each month.

“We are increasing the pool of patients who are actually willing to pay,” Cohen said, “because now they can.”

PayZen’s AI-enabled algorithm analyzes more than 30,000 nationwide data attributes per patient to help determine how much a patient can afford to pay each month. Based on that information, a payment plan might last 36 months, for instance. Provider data helps tweak the monthly payment amounts.

Patients opt in to allow their personal information to be shared, including data that reflects their cash flow. PayZen does a soft inquiry, not a hard inquiry, on a patient’s credit report but doesn’t check their credit score. A soft inquiry has no effect on someone’s credit score, while a hard inquiry does.

With all of this data at its disposal, PayZen can precisely underwrite and price each patient’s risk, Cohen said. Meanwhile, the fully automated setup requires no labor on the part of a healthcare provider.

PayZen pays each patient invoice upfront so that the debt comes off a healthcare provider’s book. The startup keeps about 20% of what it collects from patients, according to Cohen, and never sends unpaid debt to a collection agency. To prevent patients from digging another debt hole, PayZen accepts payments only by ACH or debit card, and not by credit card.

Throughout the process, a patient deals directly with their healthcare provider, meaning PayZen remains a behind-the-scenes player.

“Medical debt remains the number one source of bankruptcy in the U.S., and as a result, people are avoiding potentially life-saving care. With PayZen’s zero-interest model, Americans can stop being forced to make the choice between a doctor’s appointment and a rent bill,” said Chris Scoogins, a partner at SignalFire.

Given that Americans spent $3.8 trillion on health care in 2019, Cohen believes it’s only a matter of time before other CNPL startups pop up. “There’s room for a lot more players in this space, just like there is in BNPL,” he said.

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